20210330 The big lie: Noo Finance and the confidence trick by FinTechs and regulators.

Those developing and financing fintech companies do not expect, in many cases, to reach profitability: they expect to build a user base and to sell out. There are so many that there is no reason for banks to be competitive as to which they buy: it’s a very well-stocked pond they are fishing in. The banks don’t need more than one or two fintechs in their group and, in most countries, there are more than enough to go around.

The ACCC’s statement suggests that the regulator has only nominal control over Noo Finance. “Supporting our decision is that we have seen several banks and non-bank lenders outside the big four invest heavily in their technology and service offering to improve user[s’] experience.”

After all, there’s that big pond: “Whilst in this instance we found that the removal of 86 400 is unlikely to substantially lessen competition in the market, we will continue to closely scrutinise proposed acquisitions of emerging competitors, particularly by major banks,” Mr Sims said. “Market feedback suggested that while 86 400 is innovative, particularly in reducing the time and effort in completing home loan applications, there are a number of other businesses with similar offerings or the ability to replicate them. These other competitors continue to bring a similar disruptive influence to the market”

That translates to “there are lots of fish in the sea and banks and others are developing their own software. There is no good reason not to let them buy in a functioning product that is proven in both a technological and marketing sense.” To be clear, there can be absolutely no criticism of that approach.

Where the criticism arises is here: most Noo Finance companies are not designed with a view to trading profit. They are designed with a view to making a profit for their shareholders on disposal. Their price depends on two things – first their customer base (think “eyeballs” in the dot com boom era) and on their so-called assets which means the debt that others owe to them which, as housing crises repeatedly reveal, are often not truly to be considered assets any more than the trinkets in a pawnbroker’s window on a wet Wednesday when no one wants to leave home or wherever else they are hiding.

Here’s the thing: across the world Noo Finance, using the generic term “fintech,” became the darling of regulators in or about 2017. By 2018, regulators were competing to host more and more. But no one wanted to face the reality that these companies were doing nothing new: they weren’t even using new technology.